Can looking at price per share tell a buyer the value of a stock? Not necessarily, Sal explains as he calculates the price to earnings ratio to demonstrate this relativity. He reminds learners to consider the source of a company's reported earnings per share, in this case the trailing 12-month earnings. He compares two companies, explaining the meaning of the resulting ratios and how they can change from year to year. Sal also outlines stock trends as a reason to invest in a high P/E ratio company. Finally, he briefly breaks down the reduced value of future earnings and explains the standard 10 times price to earnings based on an earnings stream and inflation. This last part will require more explanation on your part, as it isn't comprehensively explained.
